NEW YORK (Reuters) – Stocks around the world slid on Monday, along with bond yields, after U.S. President Donald Trump threatened to raise tariffs on China, triggering an investor exodus from risky assets.

But assets such as oil and currencies changed direction as the day wore on as investors were not convinced Trump would follow through with a threat made on Sunday to raise tariffs on $200 billion worth of Chinese goods this week.

All the same, investors reduced their risk exposure, with U.S. Treasury yields lower as investors favored low-risk government bonds over stocks.

Oil futures edged higher in volatile trade as rising tensions between the United States and Iran buoyed prices, which earlier touched a one-month low due to the tweets from Trump. [O/R]

In U.S. equities, the three major indexes fell after declines in Europe and China, where the Shanghai SE Composite had its biggest one-day percentage drop since February 2016.

U.S. indexes, however, pared their losses slightly by mid-afternoon.

“The news gave investors a chance to take profits off the table. Markets are comfortable with the idea that Trump is using this as a negotiation tactic to get a trade deal done,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“Whether or not China will be able to meet the demands of the administration, that is questionable, but I think a trade agreement is on its way.”

Fear about trade-war escalation was also balanced by a statement from China’s foreign ministry on Monday that a delegation was still preparing to go to United States for trade talks.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 6, 2019. REUTERS/Brendan McDermid

“That’s what’s keeping markets from moving down further. People are realizing that if talks